Atlantic Union of Power Grid Would Lower Customer Bills

Atlantic Union of Power Grid Would Lower Customer Bills

Atlantic Canada is moving toward major changes in electric generation and has opportunities to develop more efficient and economic regional electricity exchanges.

With the addition of Muskrat Falls hydropower, the development of wind generation, and new transmission links, the region’s electricity profile is being reshaped. The use of fossil-fuel generation will be reduced by the end of the decade, as older units reach retirement age.

In varying degrees, provinces have adopted policies to push the development of renewable resources. Newfoundland and Labrador will be almost entirely reliant on renewables. Nova Scotia will use more imported hydro. P.E.I. seeks to buttress its already strong position in wind power. New Brunswick is pushing efficiency and conservation.

For the first time, Newfoundland and Labrador will be part of the region’s electric sector. The Maritime Link between Newfoundland and Nova Scotia will assist in the reduction of coal-fired generation, promote a sharp increase in the use of renewable resources, and increase system reliability.

The hallmark of electricity policy in the region has been the reluctance of provincial governments to accept regional arrangements. Concern about losing control of the electric sector has been the underlying cause of the inability of provinces to co-operate to realize the full benefits of their resources.

The benefits of new transmission links and more renewable supply can be of greater value if the provinces increase their co-operation. Though each province has been reluctant to yield any control over its electricity policy, regional measures can be taken to produce increased reliability and economic use of resources without undermining provincial authority.

Each province can decide for itself if it wants to create a competitive electricity market. New Brunswick has abandoned its attempt to allow such a market, while Nova Scotia appears to be moving toward a system designed to favour the competitive supply of renewables. Still, the dominant role of a single electric utility in each province is unlikely to change.

The provinces no longer feel pressure from the American markets to create competitive trading arrangements in Atlantic Canada. But Emera, the Nova Scotia energy company, is expanding its reach into New England markets. Nalcor, the analogous company in Newfoundland and Labrador, plans to seek new U.S. markets as well.

The development of hydro and wind power in the region can be complementary. Because the availability of wind power may be intermittent, its benefits can be improved by operating it in conjunction with hydro, whose flow can be adjusted to produce a reliable combination product.

The provinces have been co-operating through the federally supported Atlantic Energy Gateway in exploring co-operation in the electric sector. But, despite pledges to move forward, little progress has been made.

Concerns about loss of provincial control may be exaggerated. Much can be accomplished through voluntary co-operation. Measures can be adopted progressively as provinces become comfortable with regional initiatives.

One area ripe for more integrated operations is transmission. Proposals to create an arrangement to provide reliable service at the lowest cost by sharing reserves have made no discernible progress. Co-ordinated transmission planning, now lacking, could also produce greater efficiency and resulting savings for customers.

Divergent and sometimes conflicting regulation could be harmonized without any province giving up its complete control of the regulatory regimen. And separating regulators from the political process, an area in which there has been some recent progress, could yield greater stability and predictability.

Much of what might be done co-operatively, as new electric supply develops, has been tried elsewhere in North America. Greater interaction among provinces and utilities can thus draw lessons from experience elsewhere.

In short, major change is coming in the Atlantic Canada electric sector. Benefits to customers will flow from the increased use of hydro and wind power, plus the more efficient use of electricity.

But progress will come at a price to consumers, because new renewable resources and related transmission will cause rate increases. That makes it important for provincial governments and utilities to seek all the economies they can achieve, while protecting their right to govern their own utilities and resources.

Political considerations will always be present, but policy objectives need to be defined with the customer always in mind. The goal should be to benefit customers in terms of reliable service at reasonable rates. Increased co-operation between the Atlantic provinces can help achieve these objectives, ensuring that consumers realize the full benefits of the opportunities that will be available in the years ahead.

Gordon Weil is the senior fellow in electricity policy for AIMS, and the author of “Taking Stock of Atlantic Canada’s Energy Sector”